So we have a new Treasury Secretary. Jack Lew got by a Senate vote last night. I wish Mr. Lew well, he will need all the help he can get. He’s taking charge at exactly the wrong right time. The country is about to jump off the sequester cliff and in less than a month there has to be either an approved budget, or a Continuing Resolution to keep the government running. We shall see if Mr. Lew is up to the job very soon.
There were many questions about Mr. Lew. His history (and huge bucks) from NYU should have been a question, but no one asked about that. And there was his time with Citi and Bob Rubin before the SHTF. Oh well, who cares about things in the past?
There is one aspect of JL’s past that did not come up at all. I’m surprised that it didn’t as it may prove to be a big deal. Way-way back in 1978, when JL was at Harvard, he wrote a paper about taxes and Social Security for his senior thesis. I found the details of JL’s efforts 25 years ago in an article from Charles Johnson at the Blaze (Link). The paper had a catch title:
“The Ideology and Politics of Old Age Insurance in the United States.”
The young JL penned some things back in his Harvard days that would turn the blood cold of most SS lovers today. I suspect that some of his words would also tick off a few conservatives. If JL still believed what he wrote years ago, he would never have been considered as Obama’s T-Sec. He certainly would not have been confirmed by the Senate.
JL was a big supporter of Social Security when he was a kid. He thought that retirement checks were a birthright:
“Old age and Medicare benefits are guaranteed as a matter of right even though many recipients draw more benefits than they have paid in contributions.”
This type of thinking does not sit well today. The government will have to cut the legs off the military, layoff air traffic controllers and meat inspectors (and all that other horrible stuff that is about to happen) yet JL thinks that the rest of the country should go to hell in a handbag so that seniors can get retirement checks that they did not pay for. It gets worse:
Congress was reluctant to abandon the principle of self-supporting old age insurance, because of a misguided focus on “financial solvency.”
Oh boy! Talk like that today, and you get shown the door. One has to wonder if JL is still of this mind. Does he still believe that a focus on “fiscal solvency” is a misguided policy? He better have changed his views – If he hasn’t, then the USA is going to be a single A in four years.
In 1978 SS was headed into a wall. The problem was “fixed” in 1983 when Alan Greenspan pushed Congress for big increases in payroll taxes to shore up SS’s finances. JL was in favor of a different approach than Greenspan. He recognized the major flaw in SS – payroll taxes are very regressive.
“Congress has denied progressive taxes for insurance benefits”
“The logic of this course is difficult to understand but appears to represent a continuation of the deeply rooted belief in the tradition of self-support and individualism which for so long blocked passage of social insurance.”
JL is stepping on a cornerstone of SS. This program was supposed to be separate and apart from the government. The SS defenders are still crying, “SS does not add to the deficit – Leave it alone”. But JL was spot on with his observation. SS payroll taxes are very regressive. For the progressives who support SS, the inconsistency of regressive taxes has always been an issue. One can’t be a progressive, and also believe in regressive taxation.
In his paper, JL argued for “experimentation” to address the fundamental flaw of SS. He favored eliminating the regressive payroll tax and replacing the revenue with direct contributions from the Treasury. As income taxes are progressive; this resolves the regressive problem.
JL was right about the regressive aspect of SS. But what he did not take into consideration is the fact that if general income taxes are used to fund SS checks, then those checks would be an on budget expense. SS would become Paygo. It would take only a few years before the public turned on SS if this were to happen. The fact that SS can today claim, “We’re off budget” would be lost if income taxes replaced payroll taxes. (Progressives supported the 2% increase in payroll taxes in 2013 in an effort maintain the “off budget” meme. Totally inconsistent logic.)
Jump to today. SS (especially the DI fund) is in need of a fix. Either benefits get cut, or SS revenues go up (some combo of the two are coming). Obama is not going to support more regressive payroll taxes to bailout SS. But Obama does not want to be the Prez that cuts SS benefits either. The only other option would be for general tax revenues to be diverted to SS. This is exactly what happened the last three years with the “temporary” 2% reduction in payroll taxes. And this is exactly what JL advocated in his thesis. Back to 1978, and the youthful JL:
Social Security is “only a beginning” in an “embattled struggle for social insurance.”
Yikes! Sounds like Marx? He goes on:
Meeting that obligation would require the government to guarantee retirees a fixed amount of money to live on.
That sounds “Commie” to me. JL agrees:
The specter of Communism, made that kind of solution (progressive taxation for SS) unlikely.
So as a kid, JL was writing like a Pinko, what was he thinking?
“Communism at home and abroad became the target of exaggerated fears”
This was 1978, the Cold War was on. Vietnam was over, but still a very raw wound. Not at all unusual for Harvard types to be leaning down the left fork of the road. JL concluded that the fear of Communism would not allow congress to achieve his dream:
Government had an obligation to guarantee, or share the cost of guaranteeing, a minimum income for any American.
How would you describe that philosophy? “Communism” does come to mind….
JL has been around the block a few times since he wrote his paper. But I wonder how much he has actually changed. If he does succeed in a plan to supplement SS with general tax dollars he will be the guy who goes down in history as having destroyed it. If SS gets socialized, it’s dead in less than a decade. I hope JL pushes to where he wanted to go as a boy. To save SS, it has to be broken apart and put back together. JL’s thinking from 1978 would achieve that.
Hat Tip for Charles Johnson for coming up with JL’s old thesis.
These guys all come out of the same exact mold and we wonder why nothing has changed or ever will change in Washington. Attorney and Career bureau”rat”.
Jacob Joseph “Jack” Lew is an American government administrator and attorney who is the 75th and current United States Secretary of the Treasury, serving since 2013. He served as the 25th White House Chief of Staff from 2012 to 2013. Wikipedia Born: August 29, 1955 (age 57), New York City
Nationality: American. Spouse: Ruth Schwartz. Education: Carleton College, Forest Hills High School,
Children: Shoshi Lew, Danny Lew, Previous offices: White House Chief of Staff (2012 – 2013),
I don’t see any evidence that JL has changed his mindset in any appreciable way these last few decades. He’s really a perfect pick for Obama, a real “fellow traveler”. They both get that warm, fuzzy feeling as they do their best to redistribute and reach for their goals of top down, statist control.
It is now over 1.400 days since the Senate Democrats passed a budget, and it seems JL has been one of the architects of that strategy. Better to rule by executive order and spend with little or no oversight than govern in the light of day.
Like his patron, he is also a very facile liar. “The sequester is not something that I’ve proposed,” Obama has said. “It is something that Congress has proposed.” Lew echoed that falsehood. Fortunately, Bob Woodward had the truth and forced them to walk that back.
Unlike the other two new cabinet secretaries, John F’ing Kerry and Chuck Hagel, JL is a smart fellow and likely quite competent. Given his predilection for leftist solutions, it makes him the more dangerous of the three.
It’s just another chapter in the nightmare that is the Obama administration. Millions are praying for Watergate II to wash this all away.
Went to the Blaze and will tack in on under you as a daily reader.
Lew is a minion of the banking elite that has used the low information voters to co-opt the Dem party and push their pro-banker agenda. Rubin (Harvard alum) was the Godfather of that approach.
Has anyone ever wondered if it is the media and elite universities that truly control policy in America? These schools funnel students to Wall St. NGOs, government jobs. They get the Harvard stamp of approval. The policies that were in the lab, research phase of 25 years ago, become sources for NY Times articles, which molds public opinion and becomes government policy today. They all hold the same beliefs looking at campaign donations by professors and media members. Due to control of admissions to elite schools and curriculum, they forever push things leftward.
Harvard always leans left. It has since the progressives (America’s word for communists) invaded it at the turn of the 20th century and completed their overthrow of the old, university order in the ’60s.
From the way our government is lately I think a person should have to own land, speak English, be able to read, write, add, subtract, devide and pay taxes before they can vote! If this were so then votes could not be purchased with food stamps and cell phones! It is just like a computer, put in slime and get out slime!
I think one should be able to spell “divide” correctly before arrogantly demanding it, along with the ability to WRITE, from others. I know, I know… I’m an elitist commie.
Sorry I didn’t check my spelling properly. Life is just full or sadness.
What’s up with you people? Nothing wrong with Jack Lew’s thinking that every American ought to be able to retire with a fair and equitable income stream. Wouldn’t you want that for your parents, even if they hadn’t been successful in business?? And yes, we ought to find a way to pay for it (other than by printing money). If you take umbrage with that statement, you probably think the absurdly huge disparity of wealth in the US (outlined in this video) is okay: http://mashable.com/2013/03/02/wealth-inequality/
If so, you’d be a strong candidate for playing the Tin Man in the Wizard of OZ.
I agree with JLG. I think it would be better if voters had to have skin in the game. I also think they need to have taken in enough education to understand the long term consequences of their decisions. I still have a clear memory of how frustrated my father use to get with renters who could not understand that voting for increased property taxes would result in higher rents.
To the arrogant “elitist, commie” would like to say that is is unreasonable to expect others to be perfect in order to be responsible citizens.
To Richard I would like to say there is much wrong with Jack Lew’s and your thinking. Retirement needs to come from savings. One needs to live on less than you earn and save what is left over for retirement.
CGB: I agree with your general premise (about saving) and respect the fact that you and I probably see the world very differently. That’s okay. Yes, people ought to live within their means, pay for what they take, save for retirement (if they are in a position to do so), be considerate of future generations and leave the planet a better place. I live by that philosophy and pass over many material things in life to insure I’m financially responsible; I have little debt. Unfortunately, not everyone is in a position to live the perfect financial life; and certainly, the playing field isn’t level for all. Not even close!
In the end, we’re all human beings and its a matter of priorities: there are many socieities on the planet that believe taking care of their elders (not just family) is an obligation they are willing to commit to. I join them and have no animosity towards those who may have been more selfish along the way and not prepared for the later years in life. Guess I’m in the minority and just a little less self-centered than most of my fellow Americans. Don’t get me wrong: I’m a businessman and make good money. However, the world really would be a better place if people were not as greedy, selfish and self-centered as they are. Perhaps you’ll realize that a little later in life.
“One can’t be a progressive, and support regressive taxes”.
Congrats. The weakest attempt at logic for ending SS that I have seen yet.